Business groups may sue over state’s no-call rule
Law may have unintended consequences
By Charles Rathmann, SBT Reporter
An administrative rule related to Wisconsin’s do-not-call list legislation could make it almost impossible for people in real estate and related fields to do business, according to representatives of the building and real estate industry.
The rule was drafted by the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP). Although the law was enacted earlier this year, some of its interpretations and enforcement mechanisms are still being developed.
The Wisconsin Realtors Association (WRA) and other groups are planning to file a law suit against the state agency unless the law is changed.
According to WRA general counsel Rick Staff, an administrative rule of the law would affect residential real estate agents the most.
Gone are the days when real estate agents could cold-call for-sale-by-owners — people trying to sell their homes by themselves — to offer them brokerage services. Staff said commercial brokers would be affected as well. Even when brokers register with the state as telemarketers, they could still be in violation if they call a client at home’ a frequent occurrence, according to Staff.
Insurance agents also call their clients at home, but under the do-not-call rule, the agents would be barred from calling clients to sell them additional insurance lines.
State Sen. Tom Reynolds (R-West Allis), who chairs the Senate Committee on Labor, Small Business Development and Consumer Affairs, said he has heard from "a good number" of insurance agents about the rule.
"One of the insurance agents said he is only allowed to call a client once to tell the person his insurance is expiring," Reynolds said. "If he leaves a message, and the machine cuts him off, that is his one phone call."
According to Jim Rabbit, the DATCP senior analyst who worked on the rule, writing an appropriate code for calls to existing clients was tough.
"We put in the client exemption — you can call your client," Rabbit said. "The difficulty we ran into was the long-distance phone companies. They came to us and said, ‘We have everybody as a client.’ We had to ask what the consumer thinks, and as a result, we used the words ‘same type of product or service.’ It should be something that the consumer would say, ‘I understand why you are calling me.’"
Rabbit said that if lines of insurance are similar, the rule may not apply, and agents would be able to call clients who request it.
"But if you have homeowners insurance and someone wants to sell you life or health or something to that effect — those are the ones that consumers kind of separate in their minds," Rabbit said.
Ron Kuehn, a lobbyist for the Professional Insurance Agents of Wisconsin, the Wisconsin Association of Insurance and Financial Advisors and the Independent Insurance Agents of Wisconsin, said the rule prevents insurance agents from using one of their best marketing tools — referrals.
"Our ability to call someone to make an appointment is jeopardized," Kuehn said. "If your neighbor has problems with insurance, and you tell him, ‘You should call my agent,’ and your neighbor says the agent should call him — you can’t do that."
Just registering with DATCP as a telemarketer can cost as much as $20,000 a year, but smaller businesses also will wind up paying a combination of an annual $700 fee, plus $75 per phone line and other charges for additional copies of the list.
"They have just regulated every single member of our industry," Staff said. "The problem is with the definition of a telephone solicitation. A telephone solicitation is a call to encourage someone to purchase goods or services, whether you are selling them or not. Brokers make a lot of calls to follow up on things like insurance binders and other details of the sale. Those are all considered telephone solicitations under the rule. Now, if you need to follow up on details related to the sale, and you call them at their home number, you could be in violation."
And violations will come with a penalty — a stiffer penalty than provided by the law that underlies the DATCP rule.
The initial legislation creating the no-call list allows for a $100 fine per violation. But the administrative rule, written as a subsection to an administrative code dealing with consumer fraud, could be construed to allow a $1,000 fine per violation.
The fine leveled by the state is only part of the potential costs of violating the no-call list rule.
According to Staff, while the underlying legislation allows for a flat per-violation fine, the DATCP rule allows someone to sue for punitive damages.
"We wrote the rule under the authority of a Federal Trade Commission code," Rabbit said. The FTC code deals with deceptive business practices.
"Anyone who suffers pecuniary loss may start a private legal action. It is hard to imagine where someone will be able to say that because someone made my phone ring, ‘I lost money,’" Rabbit said.
"The reason we used the authority because we needed it to write a rule that would work. We put right in the rule that just because the phone rings, that does not mean there is a pecuniary damage," Rabbit said.
Staff insists that some lawyers would not be above approaching companies that are apparently in violation and shaking them down for quick settlements.
"We are concerned about trial lawyers batching up class-action lawsuits and getting a little creative about that," Staff said.
"We will be defendants in a test case someday," Kuehn said. "A member will be accused of violating one or more component of the administrative rule. And then, we will be in court."
According to Reynolds’ office, the senator is hoping to bring members of affected industries and DATCP officials together for a meeting soon to determine if a solution can be reached.
Staff and Kuehn also indicated that a political fix would be preferable to litigation.
According to Reynolds, while legislation could be enacted quickly to solve the problem, the administrative rule process, with its many hearings and longer timelines, will likely be used to close the gap.
"An emergency rule could be issued tomorrow if everyone were on the same page, and it would start working right away," Reynolds said. "The problem with legislation on the do-not-call list is that you are liable to run into political landmines. People will allege you are trying to do away with the original law, which of course, we aren’t."
Kuehn indicated he was planning to seek a resolution through the administrative rule-making process, as well.
"In order to change the administrative rule, you have to have the willingness of the agency or go to the Joint Committee on Administrative Rules (JCOAR). We are going to go to at it with the new (Doyle) administration and to JCOAR. We have already had some discussions with JCOAR."
Ferbruary 21, 2003 Small Business Times, Milwaukee
